It Pays to Get It Right—Listing Your Creditors in Your Bankruptcy

Of course the main reason most people file bankruptcy is to get relief from creditors: either discharging debts entirely, or at least getting more time to pay debts like mortgages and car loans. It’s important to list each and every debt that you owe, in order to make sure that those creditors can never pursue you on any debt.

At David P. Lloyd, Ltd., we start with a credit report on virtually every bankruptcy file. That makes sure that, not only do we get every creditor, even those who may not have contacted you for a while, but we make sure that we get each creditor at the address it uses as its official location—they can’t ever say that we didn’t send notice to the correct address. Using a credit report also avoids errors; our bankruptcy software automatically uploads every creditor’s name, address, claim amount, and account number into the bankruptcy forms so that the information gets reported without any chance of a slip-up.

But we don’t stop at the credit report. There are a number of debts that don’t get reported to credit reporting agencies: Medical bills, debts to local businesses, loans from family and personal acquaintances, guaranties of business debt, potential lawsuits, and others. That’s why it’s important for us to ask, in a number of ways, if there is anyone out there that you might owe money to—and it’s important for you to tell us about any kind of debt that you might owe, no matter how remote or unlikely.

One special circumstance that not everyone thinks about: Is there a chance that someone will sue you? Have you been in an accident lately? Did you have a business dispute about whether the work was done right, or whether it was paid for? Have you operated a business that might have debts or possible lawsuits? It’s always better to list a creditor with an unknown claim than to have that claim pop up years later, after your bankruptcy is over.

Why does it matter? If a creditor is not listed in your bankruptcy, that creditor’s claim might not be discharged in your bankruptcy. If a Chapter 7, if the trustee finds any source of money to pay creditors, and a creditor does not get notice of your case in time to file a claim, your debt to that creditor will not be discharged—you will go through your whole bankruptcy and still owe the money. Same story in a Chapter 13—if we don’t list the debt, the creditor won’t be paid through your repayment plan, and after making all the plan payments, you’ll still owe the money.

Providing accurate and complete information about every part of your financial picture—your property, your debts, your financial history—is very important. Before you file bankruptcy, make sure you think about everyone who might claim that you owe them money. And then it’s up to us to make sure we ask.